U.S. President Donald Trump earlier this month attacked the World Trade Organization (WTO) for allowing countries such as India and China to engage in unfair trade practices that affect American economic interests.
He argued that these countries are not developing economies, as they claim to be, but instead grown economies that do not deserve any preferential trade treatment from the WTO over developed countries such as the U.S.
What is the “developing country” status?
The “developing country” status allows a member of the WTO to seek temporary exception from the commitments under various multilateral trade agreements ratified by the organisation.
Introduced during the initial days of the WTO as a mechanism to offer some respite to poor countries while they try to adjust to a new global trade order marked by lower barriers to trade.
How are they classified?
The WTO does not formally classify any of its members as a developing country.
Individual countries are allowed to unilaterally classify themselves as developing economies. So, as many as two-thirds of the 164 members of the WTO have classified themselves as developing countries.
Benefits:
Developing countries can seek to delay the implementation of the WTO agreements owing to their disadvantaged economic status.
They can continue to impose tariffs and quotas on goods and services in order to limit imports and promote domestic producers who may otherwise be affected adversely by imports that are lower in price or better in quality.
What’s the allegation by the US now?
Since the WTO allows countries to unilaterally classify themselves as “developing”, many countries have been happy to make use of this freedom.
Even many developed economies such as Singapore and Hong Kong which have per capita income levels higher than the U.S., have made use of the provision to classify themselves as growing economies.
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